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Why is GAP protection so important? Because standard comprehensive and collision auto policies only cover your new car's fair market value. When you buy a car, you pay the sticker price for that vehicle. As you use the vehicle, it depreciates in value, which then determines the market price for the car. This market price is the amount that your regular auto insurance covers and is usually less than your original loan amount.
That's where GAP protection comes in. A GAP car protection policy insures you for the difference between what you owe on your loan and what your insurance company says the vehicle is worth (the market value). Please keep in mind that many insurance companies place a cap on the amount financed, hence GAP will cover up to 120% or 150% of the retail value of the vehicle. Readyour GAP waiver form carefully for these limitations. If you don't have GAP protection and you are involved in an auto accident that leaves your new car totaled, you could end up paying off the portion of your loan balance that your insurance won't cover - and you don't even have the vehicle anymore.
If you are leasing your car, it's very likely the leasing company will require GAP protection. GAP protection coverage would also become critical should your car be stolen. If this would happen, the insurance situation is the same as in the case of an at-fault accident on your part: comprehensive insurance will cover the value of the vehicle, but not necessarily the value of the loan that you owe to the bank. You could be stuck paying thousands for a car that's long gone.
GAP protection is not a policy you will need forever, but only for the first few years of ownership. During this period, it will give you some driving security and peace of mind. And it doesn't cost much.
Your credit union may offer GAP protection. And like anything else through your credit union, you can trust that they have your best interests in mind. Ask your credit union about GAP protection today.
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